157 companies with signs of insolvent… Decrease from the previous year by excluding the corona effect

Input 2020.12.28 12:04 | Revision 2020.12.28 12:14

This year, four large companies and 153 small and medium-sized enterprises were targeted for restructuring. Of these, two large companies and 89 small and medium-sized enterprises are subject to expulsion, including legal management. The number of companies subject to restructuring decreased by 53 compared to last year, and this year’s credit risk assessment was conducted excluding temporary effects from the novel coronavirus infection (Corona 19).

The Financial Supervisory Service announced on the 28th that as a result of credit risk assessment in 2020 by creditors, 157 companies were selected as companies with signs of insolvent.

In accordance with the Corporate Restructuring Promotion Act (the Promotion Act), creditor banks evaluate financial risks and operating risks once a year for large companies with a credit contribution of 50 billion won or more and small and medium-sized enterprises with a credit contribution of 50 billion won or more in the financial sector. It’s a sort of work. According to the evaluation grades (A, B, C, D), grade C is classified as a creditor’s workout, and grade D is classified as a company with signs of insolvency that must undergo self-rehabilitation procedures such as legal management.

Of the 157 companies selected as insolvent sign companies this year, 4 are large and 153 are SMEs. 53 companies decreased from last year. The number of large corporations decreased by 5 and the number of SMEs decreased by 48. Among the large companies with signs of insolvency, two C and D grades were each counted. There were 64 and 89 SMEs, respectively.

By industry, 17 metal processing companies, 13 wholesale and product brokerage companies, 13 real estate companies, 12 rubber and plastic companies, 12 machinery and equipment companies, 12 automobile companies, and so on. Steel (+3), rubber and plastics (+2) increased compared to last year, while mechanical equipment (-23), electronics (-8), real estate (-6), and automobiles (-5) ), etc. decreased.

Despite the difficulties caused by the coronavirus, the number of companies with signs of insolvency in large and small and medium-sized companies all decreased compared to the previous year, it seems that this year’s credit risk assessment was carried out in consideration of these special circumstances. Credit risk assessment for large corporations has been carried out in the first half of each year (March), but the FSS has delayed the schedule to the second half (June-November), when SMEs are evaluated. It is a measure of concern that the number of companies with signs of insolvency could increase exponentially if the evaluation is made based on the situation in which the impact of the corona spread is reflected intact. The Financial Supervisory Service’s policy to exclude the temporary effects of the corona as much as possible was also reflected. In addition, the drop in the delinquency rate was also a part of the effect of the corona-related financial support for liquidity.

The Financial Supervisory Service also explained that the trend of corporate earnings recovery from the third quarter was reflected. According to the Korea Exchange, the operating profit of Korean listed companies in July-September this year was 7 trillion 100 billion won, an increase of 43.5% from 16.400 billion won in April-June. The operating margin also increased 1.74 percentage points (P) from 5.51% to 7.25% over the same period.

The financial sector credit contribution to companies with signs of insolvent is 2.3 trillion won. Of these, banknotes accounted for 78.3% with 1.8 trillion won. Of the credit contributions, large corporations accounted for 700 billion won, and small and medium-sized enterprises accounted for 1.6 trillion won. In case of reclassifying the asset quality of loans for companies with signs of insolvent, the additional credit loss provisions for banks are estimated at KRW235.5 billion.

The Financial Supervisory Service said, “If you consider the loss-absorbing ability of domestic banks, the impact on the soundness of banks is not expected to be significant.” Meanwhile, for companies that do not apply for a workout, the creditor bank will be instructed to strengthen the follow-up management.”